It is that time of the year. This is the time to write down all of our accomplishments of the past year and the new goals for the next year. You probably want to learn a new hobby or finally lose weight. But, have you thought about financial resolutions? Financial resolutions are goals that you want to achieve with your finances. It might sound hard, but you can do it! Anyone can do it. All you need to do is find out what you want to achieve. Luckily, this article will tell you everything there is to know about the best financial resolutions for 2022.
Do You Have Any Financial Resolutions for 2022?
If your answer is yes, then good for you! But, if your answer is no, then maybe it is time to change that. Think of financial resolutions as steps that will help you improve your financial situation. You can consider refinancing your mortgage or your student loans. Maybe, this year you can finally work on repaying your credit card. If you do not really have it in you to stick to a budget, then you can create a spending plan instead. Work on automating your savings and setting aside funds for emergencies. Additionally, you can work on diversifying your portfolio and boosting your retirement savings. If you are really dedicated to improving your financial situation, then you can think about changing your lifestyle.
Think About Refinancing Your Mortgage And Your Student Loans
In recent years, mortgage rates have been slowly going down. This is why you should think about refinancing your mortgage. According to Investopedia, “Refinancing a mortgage means paying off an existing loan and replacing it with a new one.” You will be able to get a lower interest rate through mortgage refinancing. Additionally, you can shorten the term of your mortgage. You should think about refinancing your student loans, as well. The same process works with student loans as with mortgages. You have the option to refinance your student loans. That way you can pay at a lower interest rate for a shorter term. (The Investopedia Team)
Try To Manage Your Credit Card Debt
Studies show that 75 percent of adults carry credit card balances from one month to another. If you currently have credit card debt, then you should pay it off as soon as you can. It should be your number one priority. Carrying a credit card balance is not a good idea. You will need to worry about paying off your credit card debt and the accumulating interest rates. The interest rate that comes with credit card debt can be very challenging to pay off. Fortunately, there are two strategies that will help you pay off your credit card debt. You can pay your highest amount of debt first, and work your way down, implementing the debt avalanche method. Or, you can repay your smallest amount of debt first, and work your way up, implementing the debt snowball method. (Porter)
Create a Spending Plan, Rather Than a Budget This Time Around
If you are not a fan of budgets and you feel like they are very restrictive, then you can track your expenses in a different way. A spending plan allows you to track your spending by choosing what you want to spend your money on. On the other hand, a budget allows you to track your spending by limiting what you cannot spend your money on. You should determine your monthly income and find out what you should spend your money on. Furthermore, you should consider basic expenses as your top priority in your spending plan. Then, you can start adding luxury goods and services, such as entertainment and outings.
If you have a hard time tracking your expenses, then you can think about using money management applications. Additionally, banking applications offer money management tools that can help you, as well.
Automate Your Savings To Make It Easier
If you want to boost your savings, then you should automate contributions. “Out of sight, out of mind” is the best premise to work with, regarding savings. With automated contributions, you do not need to manually set aside money every month. You will find that there are many employers, including your own, that offer employees the option of dividing their paychecks. This is why different amounts could go into different accounts. If you are not interested in dividing your paycheck, then you can try another tactic. You can automate your savings through automatic transfers from bank accounts. No matter what savings option you decide to use, you should prioritize your savings and automate contributions to your account.
Create an Emergency Fund For Any Surprises
An emergency fund will allow you to handle any financial surprises that come your way, without tapping into your savings. You can use your emergency funds for any health issues, car troubles, or other financial issues that show up out of the blue. It happens more often than not, and it is best to be prepared for it. This is a great financial endeavor and you should start on the first day of the new year. Experts recommend that you save three to six months’ worth of living expenses. You should find out how much you spend and look for areas that you can save. Once you figure that out, you can set a savings goal and set automatic contributions. Eventually, you can increase your contributions to emergency funds, as your income grows.
Increase Your Retirement Savings
Planning for your retirement is a long term goal that you need to work on as soon as possible. You might think that it is too early or too late to save for retirement. But, there is no such thing. If you want to start working on your retirement savings, then this is the year to do it! You can use the new year to increase your retirement savings and set retirement goals that you can achieve. Think about where you want to live and if you want to travel. There are different methods to increase your retirement savings. If your boss provides a 401(k) match, then you should double-check that you offer adequate contributions. That way you can get the full match. Additionally, you can look over where you are investing your money. Think about investing in different assets to diversify your portfolio.
Think About Investing More
You should think about going beyond tax-advantaged retirement contributions. If you have an emergency savings account, then you should think about setting up an investment account for specific purposes. In the case that you do set up an investment account, you might receive a higher financial return, since it is a taxable account. One of the main perks of investing outside your retirement account is that you will not be limited to an amount of money to save. You can save as much as you want! Additionally, you will receive immediate access to the money and without penalties.
If you do not know how, then you can use a robo-advisor. A robo-advisor is responsible for automatically investing on your behalf, after they consider risk tolerance and ideal earnings of the investment.
Improve Your Credit Score
You should definitely make it a financial resolution for 2022 to improve your credit score. When you improve your credit score, you increase your chances of receiving financing and access to financial services. Your credit score is a factor that defines how much interest you need on a loan. If your credit score is not-so-great, then you might receive higher interest rates. You can find out your credit score through an annual credit report from major credit reporting companies. Typically, they are free. Additionally, there are lenders and credit card issuers that give you access to your credit scores. They are also free of charge! If you plan to improve your credit score, then you should pay all of your bills in full and on time. Make sure you take advantage of score-boosting programs.
Think About Changing Your Lifestyle
If you really want to improve your finances, then you should think about changing your lifestyle and cutting corners. It might seem a little extreme, but you will find yourself saving more money than you planned. More money is always a good thing. One of the things that will definitely help you save money is to stop spending money on food. (Not entirely, but you can stop spending money on eating out). Instead, you can cook your meals and eat at home. There are meal subscription services that allow you to choose recipes every week and the service delivers the ingredients right to your door. Additionally, you can consider home-cooked food. You might not be the next MasterChef, but you can try to cook your own meals.
Look For Different Ways to Increase Your Income
There are many ways that you can boost your income. Sometimes, it does not matter how much you cut back; you still need more. This is why you should consider working a side hustle, if you have time. If you do not have time, then you should not push yourself either. Make sure that you work as a freelancer on a skill that you are good at. This will make it easier for you to find a side hustle. You can also look into investing in dividend stocks or real estate investments. Remember that boosting your income will help you earn more money, grow your savings, and achieve your financial resolutions.
If You Have The Space To Do It, Then Ask For a Raise At Your Job
Some employers offer a salary increase for employees in the new year. There are also others that do not. You need to find out which category your boss falls into. If you have the space to do it, then you should ask for a raise at work. You never know what might happen. Your boss might agree with you and give you a raise. However, you will not know for sure, unless you try.
Overall, your financial resolutions for 2022 are just as important as any other financial resolution for 2022. You can really improve your financial situation with these tips. One of the things you can do is invest in more assets and develop an emergency fund. You can look for different ways to boost your income through multiple income sources. Also, think about changing your lifestyle and work on improving your credit score. If you think you cannot do it, then you should know now that you can. Anyone can do it. But, you need to be serious about it and set realistic goals that you can reach. It might not be easy, but you will end up next year as a winner!
Porter, Kim. Average American debt 2021. 17 09 2021. 26 12 2021 <https://www.bankrate.com/personal-finance/debt/average-american-debt/>.
The Investopedia Team. When to Refinance Your Mortgage. 30 06 2021. 26 12 2021 <https://www.investopedia.com/mortgage/refinance/when-and-when-not-to-refinance-mortgage/>